The Role of Service and Sales Skills in Customer Retention

THE ROLE OF SERVICE AND SALES SKILLS

IN CUSTOMER RETENTION

This research examined whether specific service and sales skills could improve customer retention rates. A literature review was conducted to examine the following issues: (1) whether customer retention rates could be improved by attempting to resell customers who wished to cancel their accounts or stop services; (2) service quality factors that have been shown to contribute to customer retention; (3) behaviors and skills that have been linked to service quality and customer retention; and (4) the relationship of specific sales skills to these behaviors.

Improving Customer Retention Rates Through Direct Intervention

The significance of customer retention was first quantified by Reichheld and Sasser (1990). They found that profits in service industries, including credit card companies, increased in direct proportion to the length of a customer's relationship. They noted the experience of MBNA America, citing its "customer defection 'swat' team staffed by some of the company's best telemarketers," which achieved a 50% success rate in persuading customers to retain their credit cards. At MBNA, a 5% improvement in customer retention increased average customer value by 125%. Reichheld and Sasser (1990) concluded that cutting defections in half could more than double the growth rate of the average company.

Everett (1993) noted that a dedicated customer retention unit developed by Patrick J. Swanick at the Society National Bank in Cleveland, achieved a 57% success rate in persuading callers to remain with the bank. According to Everett (1993), these representatives first probed for causes, then tried to resolve the problem. He added that they followed-up on each call with a letter to the customer.

The Link Between Customer Satisfaction and Customer Retention

Many authors (Reichheld and Kenny, 1990; Zeithaml, et.al., 1990; Bowen and Lawler, 1990; Schlesinger and Heskett, 1991) have cited the relationship between customer retention and the quality of service experienced by the customer.

Reichheld and Kenny (1990) specified six factors as imperative to improving retention: senior management commitment; a customer-focused culture in which all employees and managers focused their full attention on customer satisfaction; retention information systems that tracked and analyzed the root causes of defections; empowerment of front line employees to take actions that provided immediate customer satisfaction; continuous training and development; and incentive systems based on customer retention.

Parasuraman, et. al. (1984) studied quality in four service businesses, including credit card services, and developed a model of service quality. They noted that:

"A variety